Sampoorn Vittiyea Samaveshan: RBI, NDA not on same page over financial inclusion

The Reserve Bank has argued that a year is too short a period for "processes and institutions that need to be created" in order to open these 7.5 crore new accounts.

NEW DELHI: The new financial inclusion push, Sampoorn Vittiyea Samaveshan, which Prime Minister Narendra Modi is widely expected to unveil on August 15 does not quite have the central bank on its side.

Top government sources told ET that the Reserve Bank of India (RBI) was in disagreement with three critical elements of the drive. For one, RBI has categorically stated that a Rs 5,000 overdraft "may not be allowed" for the 7.5 crore new bank accounts that the Centre is keen to open in the next year as a part of the financial inclusion drive.

While the dispensation is recommending an overdraft facility of Rs 5,000 for all new basic bank accounts, one year after satisfactory operation of the account, the Reserve Bank has argued that a year is too short a period for "processes and institutions that need to be created" in order to open these 7.5 crore new accounts. It has recommended a rollout over three years.

The government, on the other hand, is keen to ensure that all households, except those in areas with connectivity and infrastructure constraints, have a bank account with the year.

"Our concern stems from rising NPAs, especially in public sector banks. We want the programme to be staggered so that there is no stream of bad loans in the system — especially in the priority sector area," a senior RBI official told ET, speaking on the condition of anonymity.

The RBI has also told the government that it is not in favour of the credit guarantee fund that has been proposed to give comfort to banks to offer such overdrafts. The government proposed such a fund with a corpus of Rs 5,000 crore, half of which will be contributed by banks as a guarantee fee.

The NDA's ambitious financial inclusion wants every habitation across India (barring the hill states and the 82 Left-wing extremism affected districts) to have access to banking — through a bank or a banking correspondent — by August 15, 2015. The rest of the country is to be covered by August 2016.